As the first of the major streaming stocks to reveal performance data this week, all eyes have been on Netflix Inc. (NASDAQ: NFLX). The streaming market leader had a strong earnings call on Tuesday, revealing a record high for subscription numbers, but some investors are still concerned about the future.
Here are all the most important details from the latest fiscal report.
Netflix Subscriber Growth is Higher Than Ever Before
Analysts expected that Netflix would sign up 8.22 million customers in the first quarter. Instead, the company gained a total of 15.77 million. This is the most significant single-quarter subscriber growth reported in the company’s history. It is also significantly higher than the 9.6 million that the company added in the year-ago quarter.
Netflix is a major beneficiary of stay-at-home orders. More than a third of the world’s population is under some form of community lockdown. Streaming services have become extremely popular with families and individuals who can’t follow normal routines. Netflix was already the world’s largest streaming provider. Now it has extended its lead over competitors like Hulu, Disney+, and Apple TV Plus.
For as long as lockdown orders stay in place, Netflix is likely to see strong growth. The company will hope to retain its new customers once the Coronavirus Pandemic has ended, but it’s impossible to speculate on how positive the retention rate will be in the coming months.
Earnings Performance Up Over Last Year
Earnings were also strong for the company. It generated $709 million in earnings, equivalent to $1.57 per share. This was a huge improvement over the $344 million and $0.76 per share that was reported for the same quarter a year ago.
Total revenue was $5.77 billion, compared to $4.52 billion a year ago. Analysts had predicted $5.75 billion.
Why Are Investors Concerned?
The stock jumped 9% in late trading after the earnings call on Tuesday, before declining during Wednesday trading. The stock is currently down -1.25% over five days but is up 30.24% over the year so far.
Investors are concerned that the company will struggle to maintain its momentum in a post-Coronavirus economy. For Netflix, it’s something of a Catch-22 scenario. It had its best quarter ever, but now investors are concerned about how it can top it. If it had of underperformed, the stock would have declined anyway.
Investors who are interested in this stock should look at the positives. The company generated impressive fiscal performance and record subscriber growth during a global economic slowdown and major health crisis. It is in a good position to continue growing year over year, even if the current subscriber growth rate is short-lived. With an average target price of $459.73, there’s still potential for a strong upside in the mid-term.
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